If there was ever a time to invest in startups and growth companies, it’s now. Learn how companies raising capital on TycoonInvest are shaping our future.
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Once the completed raise is closed, you will receive your shares and equity ownership in the company.
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Equity represents an ownership interest in the business. There are different types of equity securities that can be issued, including voting rights, first right of refusal, or clawback rights. By offering equity, businesses can gain loyal customers, as well as investors who are interested in the long-term success of the company.
A debt security is similar to a conventional loan. This type of security can be bought and sold between two parties and the basic terms such as amount borrowed, interest rate and loan repayment date are determined up front. Companies that choose this type of security to issue, typically like to retain control of their company, and are comfortable making the debt payments for the duration of the security.
A convertible note starts off as debt, where the loan accrues interest that can be paid at the end of the term or it can be converted into equity at a predetermined discount rate. In the event that the note is “converted,” the amount of equity you receive will depend on the specific terms of the note. With the availability of a conversion option, convertible notes offer greater flexibility for the company.
Revenue shares are similar to debt securities, with a few caveats. Businesses pay back a percent of net revenue each quarter until the loan is paid in full. When the business is doing well, investors may receive larger payments, and when the business has slowed down, payments can be lower. Revenue share securities allow businesses to retain full control of their company, and are typically preferred by cyclical companies, such as those that generate most of their revenue during a certain period of time in the year.